Hepatitis B virus infection afflicts as many as 300 million people worldwide. Current therapy for chronically infected patients is suboptimal because of drug-related toxicity, low response rates and/or unsustained viral load reduction, and emergence of resistance. In addition, current drugs and compounds under development are quite costly making their availability to developing countries problematic. Effective long-term treatment with multiple low cost drugs will be required to address the needs of the majority of HBV- infected individuals. RacivirTM, (+/-)-beta-2,3' -dideoxy-3' -thia-5-fluorocytosine, [(+/-)KFC, RCV] is a 50:50 mixture of the two enantiomers of FTC. It has a similar virological profile when compared to (-)-beta-2',3' -dideoxy-3' -thia-5- fluorocytosine, [(-)-FTC, Coviracil, Emtricitabine], a drug with a proven safety and efficacy profile currently in Phase III clinical trials for HIV infections. Unlike (+)-BCH-189 (the plus-beta- enantiomer of 3TC), (+)- FTC is essentially non-toxic in various sophisticated in vitro toxicity assays. Like (-)-FTC and 3TC (Lamivudine) RCV is effective against HBV as well as HIV-1, HIV-2, and SIV (simian immunodeficiency virus) in vitro. Based on the cross-resistance profile, preliminary pharmacokinetic (PK) studies in SCID mice and in vitro selection studies with (+)-BCH-189, (+)-FTC, (-)- FTC, and RCV, we believe that RCV has a very desirable virological profile. We see RCV as a combined therapeutic modality, which is different from (-)-FTC and 3TC. This SBIR Phase 1 will focus on comparative PK and Toxicity studies in rats with Racivir and (+)-FTC. We wish to determine the maximum tolerated dose (MTD) of Racivir compared to (+)-FTC and establish a rationale, based on the safety profile, for proceeding to more advanced preclinical studies required for an IND filing for Racivir. The goal of the Phase 1 is to reach a decision point for the future development of Racivir. If the data indicate that Racivir has an acceptable toxicity profile in rats, then Phase 2 will focus on completing the preclinical safety and efficacy package required for an IND submission for Racivir, first as treatment for HBV infections and second as a treatment for HIV infections. PROPOSED COMMERCIAL APPLICATIONS: There is a need worldwide for effective, low cost, combination therapy for hepatitis B and HIV infections. Racivir has the potential to be superior to and less costly than the single enantiomers, FTC and 3TC. As such it should expand the market for effective treatments, especially in developing countries.